Disney’s Top Rival in China Is Trash Talking Its Theme Parks and Mickey Mouse

Bloomberg

- May 24, 2016 4:00 pm

Skift Take

This rant was entertaining but probably as likely to materialize as the latest Disney fairy tale. A smarter strategy would be to try to capitalize on theme park interest that Disney’s new Shanghai resort is generating.

— Hannah Sampson

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Billionaire Wang Jianlin, who’s starting tourism projects across China as Walt Disney Co. readies to open its first mainland theme park in Shanghai on June 16, said the U.S. company misread the Chinese market and shouldn’t have stepped on his home turf.

“One tiger is no match for a pack of wolves — Shanghai has one Disney, while Wanda, across the nation, will open 15 to 20,” the 61-year-old chairman of Dalian Wanda Group Co. said in an appearance on a China Central Television show that aired Sunday.

Disney said in an e-mail the comment “was not worthy of a response.”

Though Wang has jeered at Disney before, his latest salvo signals an escalation in the rivalry between the world’s biggest entertainment company and China’s largest. At stake is dominance of China’s $610 billion tourism industry, which the government predicts will double by 2020 amid a growing middle class.

Disney Threat

“Wanda is really threatened by Disney,” said Jennifer So, a tourism analyst at China Securities International based in Hong Kong. “Wanda’s skill at operating theme parks has not been proven and they have to find the right management team.”

Wanda, founded in 1988, has businesses ranging from commercial properties to films and finance, and the conglomerate had assets of 634 billion yuan ($97 billion) and revenue of 290 billion yuan in 2015. By comparison, Disney’s revenue for the 12 months ended Oct. 3, 2015 grew 8.1 percent to $52.5 billion.

Wang has said Wanda aims to surpass Disney as the world’s largest tourism company by 2020. The chairman and founder will preside over the opening of a Wanda City featuring its own theme park, movie complex and hotels in southeastern Jiangxi province that neighbors Shanghai this weekend.

Tickets for Wanda’s Jiangxi park, located in the provincial capital Nanchang, are priced at 198 yuan on most days and 248 yuan on holidays and weekends. That’s about half the price of Shanghai Disneyland, which charges adults 370 yuan each for regular tickets and 499 yuan during peak days.

Can’t Comprehend

Wang, who vies with Jack Ma for the title of China’s richest person on the Bloomberg Billionaires Index, said he couldn’t comprehend how Disney spent $5.5 billion on a park similar in scale to the Jiangxi project, which according to Wanda’s website cost 21 billion yuan. With such steep costs, Disney would have to charge high prices, which would turn away customers, he said.

“Disney knows if you rely on bricks and mortar, it’s hard to break even and that’s why their focus is on the next stage of intellectual property. This is what Chinese operators don’t have,” said China Securities’ So. “If you look at Disney, they make a lot of money from animation patents and profit contribution of park operations is pretty low.”

Wanda and Disney’s rivalry isn’t limited to China. Wanda said in February it plans to invest more than 3 billion euros ($3.4 billion) in a retail and leisure development project in France that’s aimed at taking on Disneyland Paris.

Wang’s Predictions

“Over the next 10 to 20 years, Wanda must make Disney unprofitable,” Wang said. “Every park of ours has its own business model, with constant innovation and combines indoor and outdoor activities. So I think that Disney’s prospects in China, at least financially, don’t look good to me.”

Wang forecasts Wanda will reach $100 billion in revenue and $10 billion in net income by 2020. The conglomerate, which acquired Hollywood film company Legendary Entertainment for $3.5 billion earlier this year, is poised to become the world’s largest cinema operator after it completes the purchase of Carmike Cinemas Inc.

For Disney to plan its 963-acre park outdoors in a city like Shanghai, where summers are rainy and winters are cold, revealed the company’s lack of innovative thinking, Wang said. The project is the Burbank, California-based company’s first theme park in mainland China.

Mickey Frenzy

Disney’s vast intellectual property rights has become a burden and the U.S. company seldom researches new business models, Wang said. While he acknowledged that Disney, as the world’s largest tourism business, is a very good company, the former People’s Liberation Army officer said he’s confident “Wanda will win out.”

“The days of Mickey Mouse and Donald Duck being able to create a frenzy are over,” said Wang. “They are entirely cloning previous intellectual property, cloning previous products with no innovation.”